What is the 4% Rule?

A key aspect of retirement planning is knowing how much to save. Another major component is knowing how much to spend during retirement. Overspending can lead to your retirement savings depleting. To avoid this scenarios, some investors adopt what’s called the 4% withdrawal rule. While it isn’t absolute, the 4% rule is a baseline for how much to spend annually during retirement. What is the 4% Withdrawal Rule? The 4% withdrawal rule says an investor should be able to live off of 4% of their savings during their retirement. The hope is that by following the 4% rule, an individual can live off of their retirement savings for more than 30 years. To arrive at your 4%, add up all of your investments and then calculate 4% of that sum. It’s important to keep in mind that 4% is a rule of thumb and it won’t apply to every person’s circumstances. As an example, imagine you retired with $2 million tucked away in investment accounts. 4% of that number during your first year of retirement would be $80,000. Exceptions to The 4% Rule A portfolio